consumers to shift their spending away from other types of products and
toward the monopolist’s product.
- Product Quality
Second, many firms engage in a variety of other forms of non-price
competition, such as offering competing standards of quality and product
guarantees. In the car industry, for example, Toyota and GM compete
actively in terms of the duration of their “bumper-to-bumper” warranties.
In the smartphone and tablet markets, Apple and Samsung compete
against each other by offering new products with innovative designs and
applications.
- Entry Barriers
Third, firms in many industries engage in activities that appear to be
designed to hinder the entry of new firms, thereby preventing the erosion
of existing profits. For example, a retailer’s public commitment to match
any price offered by a competing retailer may convince potential entrants
not to enter the industry.
Two In-Between Market Structures
Our discussion in this section has been a general one concerning firms in
imperfectly competitive market structures. We now go into a little more
detail and make a distinction between industries with a large number of
small firms and industries with a small number of large firms.